Thanks to zero commissions at most online brokers, you don't need a lot of money to invest in stocks. Because of that, investors with $500 or less in cash can quickly put that money to work in the stock market.
We asked some of our contributors what stocks they'd buy if they had an extra $500 lying around to invest. Here's why they wouldn't have any regrets putting that cash into Consolidated Edison (ED -0.56%), Brookfield Infrastructure (BIP -0.29%) (BIPC 0.50%), and NextEra Energy Partners (NEP 1.13%).
Boring can be beautiful, too
Reuben Gregg Brewer (Consolidated Edison): Consolidated Edison is offering investors a 4.2% dividend yield today. That's more than double the 1.3% yield of the S&P 500 index and over a percentage point higher than the 3% yield of the average utility, using the Vanguard Utility ETF as a proxy. The interesting thing is that Con Ed is one of the most reliable dividend payers around, with a 47-year streak of annual dividend hikes behind it. The increases have been modest, but obviously very consistent.
Con Ed won't excite you very much, but history suggests it won't let dividend investors down, either.
The long-term strength here comes from the market the utility serves: New York City. This is one of the most vibrant metropolitan areas on Earth and also one of its most important business centers. Even as investors worry that the New York office sector is stumbling due to the impact of the coronavirus, big tech names like Google are inking massive office deals. The death of cities, and particularly New York City, has been greatly exaggerated.
As a utility, meanwhile, Con Ed is interesting. For example, while it provides electricity, natural gas, and steam to the Big Apple and surrounding areas, it largely gets paid for the use of its transmission assets. The price of energy simply gets passed on to consumers. That positions the company well for the changing shape of electricity generation. So, even as the world moves away from carbon-based power, Con Ed should keep rewarding investors well. If you like dividends, it is hard to go wrong with this somewhat boring name, noting that the dividend yield is near a 10-year high.
An unstoppable stock for the long haul
Neha Chamaria (Brookfield Infrastructure): If you have cash on hand right now, investing it in a dividend growth stock that's also positioned to benefit from the economy's growth is a great idea. Case in point: Brookfield Infrastructure.
Brookfield Infrastructure has a strong business model -- it acquires and operates infrastructure assets with the sole aim of generating large cash flows and returning a good chunk of it to shareholders. By infrastructure, I mean transportation, energy, utilities, and data. As that covers a wide spectrum of the infrastructure sector and most of its cash flows are also regulated or contracted, Brookfield Infrastructure has been able to grow its business steadily and deliver solid returns so far. Dividends have had a huge role to play: Brookfield Infrastructure has increased dividends every year since 2009 and grown dividends at a solid compound annual rate of 10% over the period. That has hugely helped boost investor returns over the years.
Brookfield Infrastructure is flush with cash right now, which it'll likely put to good use on acquisitions. As it is, the company is targeting 5%-9% growth in annual dividends in the long run, so any inorganic growth move should ensure the company can achieve, perhaps even surpass those goals. In fact, there's another big growth catalyst on the horizon for Brookfield Infrastructure: President Joe Biden's infrastructure plan. Brookfield Infrastructure has its toes dipped in most areas that are high on Biden's priority list, such as roads and rail, water, clean energy, and data infrastructure. That makes this 3.7%-yielding stock an even more alluring pick that could be well worth your money in the long run.
A powerful growth plan
Matt DiLallo (NextEra Energy Partners): NextEra Energy Partners has been an excellent investment over the years. Since its IPO in 2014, the clean energy company has delivered a 318% total shareholder return. That's almost double the S&P 500's total return during that timeframe (162%).
A key fuel source driving NextEra Energy Partners' returns is its fast-growing dividend. The company has expanded its payout by 253% since its IPO. That's helped push its current dividend yield up to an attractive 3.5%, more than double that of the average stock in the S&P 500.
While past performance is no guarantee of future success, NextEra Energy Partners is in an excellent position to continue enriching investors. The company currently expects to grow its dividend at a best-in-class rate of 12% to 15% per year through at least 2024. Several factors power its plan, including continuing to make acquisitions from its parent, utilities giant NextEra Energy (NEE -0.22%), and third-party sellers. The company recently closed the purchase of nearly 400 megawatts of wind assets from Brookfield Renewable for $733 million. Meanwhile, it invested $320 million last year to acquire an interest in 1.1 gigawatts of renewable energy projects from NextEra. These deals grew the company's cash flow, enabling it to keep increasing its dividend.
NextEra Energy Partners has ample financial flexibility to continue making acquisitions. Meanwhile, it has a vast opportunity set, given its relationship with leading renewable energy producer and developer NextEra.
Add it all up, and NextEra Energy Partners has a high probability of delivering attractive returns for its investors. Because of that, it would make an excellent option for those who have a few hundred dollars to invest and are looking for a lower risk, high upside investment opportunity.